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·       The dollar rose to a 13-month high against a basket of currencies on Friday and the yen also made big strides, with investor appetite for risk dropping amid escalating global trade tensions and diplomatic wrangling.

The euro fell to its weakest since July 2017, while the pound dropped to its lowest in a year amid speculation Britain will leave the European Union without an agreement regarding its future relationship with Brussels.

The dollar index .DXY, which measures the greenback’s strength against a group of six major currencies, climbed more than 0.6 percent to 96.103, its highest since July 2017.

The greenback has been boosted by growing global trade tensions and strained geopolitical relationships, with the United States this week saying it would impose fresh sanctions on Moscow. Washington is also embroiled in a diplomatic feud with Turkey. 

Russia would consider it an economic war if the United States imposed a ban on banks or a particular currency, Prime Minister Dmitry Medvedev said on Friday, the TASS state news agency said.

The Chinese yuan weakened about 0.55 percent to 6.855 against the dollar in spot trading CNY=CFXS, handing back the previous day's gains.

·       The euro fell to a 13-month low against the dollar on Friday after the Financial Times reported that the eurozone’s chief financial watchdog had become concerned over exposure of the zone’s major lenders to Turkey.

The euro was one of the worst performing currencies in Friday trading, dropping 0.6 per cent to $1.146, a 13-month low. The euro was also down 0.5 per cent against the pound at £0.894.

The dollar index rose correspondingly at the outset of the European trading session as losses by the euro helped push the gauge of the US currency’s strength to its highest level since July 2017.

The 0.5 per cent jump by the gauge, which measures the greenback against a basket of peers, left it at 95.988.

·       The recovery of the euro was short-lived and EUR/USD dropped below 1.1600, approaching YTD lows.

A daily close above 1.1630 would remove short-term negative pressure while the next key resistance is 1.1700 (downtrend line). On the flip side, a close under 1.1530, would expose 1.1500/10, the strong barrier that capped the slide in May and June.

Ahead of the Asian session limited price action seems likely. Bearish bias to remain in place as long as pair holds under 1.1580/1.1600 and the negative tone could rise with a consolidation below 1.1550.

·       Russia's Prime Minister Dmitry Medvedev reportedly warned the U.S. on Friday that sanctions it plans to impose against Moscow over the nerve-agent attack of a former spy living in Britain could be treated as a declaration of an economic war.

Following Washington's announcement of fresh sanctions on Russia for its alleged poisoning of an ex-spy in Britain, a raft of more sweeping and binding measures is in the pipeline — if they can be passed by Congress.

And several experts believe these measures are likely to push their way through to becoming law before the midterm elections.

·       Turkish President Tayyip Erdogan has dismissed concerns over the tumbling lira, calling on Turks to “have no worries”, after the currency hit record lows in recent weeks on the back of a widening rift with the United States.

Early on Friday, the lira TRYTOM=D3 hit a new record low, plunging to as far as 6 against the U.S. dollar after a Turkish delegation returned from talks in Washington on Thursday with no apparent solutions to an ongoing crisis.

The recent sell-off in the lira has been fueled by investor concerns over Erdogan’s grip on monetary policy under a new powerful executive presidency and the ongoing row with the United States.

·       Top U.S. and Japanese trade officials said they better understood each other’s positions after talks on Thursday, while Tokyo appeared to stick to its position of avoiding a bilateral free-trade agreement.

However, Motegi reiterated Japan’s view that multilateral talks, which Washington has abandoned, were the best way to address trade issues. Tokyo wants to avoid a bilateral free-trade agreement - which Lighthizer called for in the past - where it could come under pressure over access to its auto and agricultural markets.

·       Japan’s exports likely grew at a solid pace in July, although worries lingered over global trade tensions, which could damage the nation’s shipments and the economy, a Reuters poll showed on Friday.

Exports are expected to have risen 6.3 percent in July from a year earlier, the poll of 16 economists showed, after rising 6.7 percent in June.

Imports likely climbed 14.4 percent last month, accelerating from a revised 2.6 percent increase in June, as higher oil prices and a weaker yen boosted import costs.

As a result, trade balance will likely show a 50 billion yen ($451.02 million) deficit for July.

·       Japanese Prime Minister Shinzo Abe looks well placed to win a September ruling party leadership race, putting the conservative leader on track to become the longest-serving premier despite a challenge by a former defense minister for the party post.

·       Oil prices dipped on Friday on worries that an escalating trade dispute between Washington and Beijing will stall economic growth and demand for fuel, even as renewed U.S. sanctions against Iran are expected to tighten supplies.

Front-month Brent crude oil futures LCOc1 were at $71.88 per barrel at 0646 GMT, down 19 cents, or 0.3 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were down by 22 cents, or 0.3 percent, at $66.59 a barrel.

Prices eased on a possible slowdown in economic growth due to escalating trade tensions.